I have a letter from HMRC, what should I do?

Request to submit a corporation tax return

Because not all charities submit annual corporation tax returns, HMRC will periodically, perhaps every 3-5 years, write to a charity to ask them to submit a corporation tax return.> 

Notification of a compliance check

HMRC do not just process returns, they do undertake compliance checks (assurance visits). HMRC must write to notify charities of such a visit. HMRC may send an information request in advance of the visit.> 

‘One to Many’ letters

HMRC periodically send out letters to groups of taxpayers, sometimes including charities, advising them to take particular care in certain areas of taxation where they see a number of errors. This is sometimes called a ‘One to Many’ letter. The aim of these letters is to encourage taxpayers to voluntarily comply with their tax obligations. Although it may be worrying to receive such a letter, it is not a compliance check by HMRC and does not mean that HMRC think you have made an error. > 

If you have received one of these letters from HMRC, the following section gives some tips on handling the correspondence.  

Dealing with requests to submit a corporation tax return

Failure to submit a return or engage with HMRC could result in you incurring penalties for failure to submit your return, or in more extreme cases of persistent failure, loss of your charitable tax reliefs.> 

You can find out more about corporation tax reliefs for charities here, charity trading income here, how to calculate the corporation tax liability of your charity here, and how to file the return, including how to minimise the fees you incur, at 2.5.1.> 

If the deadline to submit your return is imminent, and you need more time to prepare the return, you should contact the HMRC Charities Helpline and ask them to consider giving you an extension.> 

Dealing with notification of a compliance check

Although it can seem daunting, you should not ignore such letters from HMRC. Failure to engage with HMRC may result in a less favourable outcome than if you cooperate. You should ensure that you agree a time for any meetings which works for you and any of the charity team who need to be present at the meetings.

If HMRC send out an information request in advance of the visit, if possible you should ensure that you collate as much of the information requested as possible before the visit. It is often much cheaper and easier to work through information face to face with the HMRC officers than it is by correspondence. If you feel that the information request is unreasonably onerous then you should contact the sender to discuss their requirements and understand whether it would be possible to amend their request.

You may also want to walk through your internal processes and any relevant tax returns submitted to HMRC before the visit.

Dealing with ‘One to Many’ letters

Although it can seem daunting, you should not ignore letters from HMRC. There is not normally any obligation to take any specific action or to contact HMRC if you receive a ‘One to Many’ letter.

However, if the subject of the letter is relevant to your charity, you may wish to review your internal processes and any relevant tax returns submitted to HMRC. If you do find an error, then the letter should provide instructions on how to approach HMRC to resolve the position.